The Tricks and Traps of the Nintendo Switch Launch in China, And What To Expect.

Article originally posted on my LinkedIn on December 10th, 2019.

The Nintendo Switch finally launched in China. December 10^th was the day. By partnering up with Tencent, Nintendo found the way to officially deploy its flagship console into the Chinese market (still no word on the Lite version). I wrote extensively about the peculiarities of the console gaming market in China, and also about the official Chinese Switch launch when it was disclosed back in July. One of the things I noted was how inconsequential and residual the launch would be for Nintendo, sales-wise at least. Concurring Nintendo’s CEO Shuntaro Furukawa told investors, prior to launch, that “We have not factored the sales in China into our financial forecast for the current fiscal year, and even if the launch does occur during the current fiscal year, we do not expect a significant impact on this year’s business results,”.

In fact, this is very much a Tencent product launch more than a Nintendo one. Checking the website of the Switch in China makes it very clear, as the Tencent logo is prominently featured on top, while "Nintendo" only shows up in the marketing pictures.

That was context. Now lets look at what Chinese consumers are really getting with this “Chinese Switch”, and what to expect going forward.

Same same, but different?

One of the main question marks shadowing the launch of the console in China concerned region locking. Both the officially launched Xbox One and PS4 have at least some region locking features which set them apart from worldwide editions (the Xbox One has harsher region lock restrictions). Surprisingly, the Chinese Switch won’t be region locked, at least not on the hardware itself. Meaning, consumers will be able to insert any game cartridge they bought anywhere in the world, and play the game! This is both surprising, but also a very smart and pragmatic move from Tencent/Nintendo for the Chinese market to ensure a big launch line-up. Since all games officially launched in China need to be authorized by government entities (censors, publishing authorities, etc), this will substantially restrict the catalog of games officially available in the country. So much so that only one game is officially available for the Switch at launch in China: New Super Mario Bros. U Deluxe. More games are promised to show up in the near future (even some China-only exclusives), but Tencent is clearly relying on the region-free nature of the machine to make the console more appealing to consumers.

Most Switch games are available and easy to find on Taobao (the biggest e-commerce platform in the country), as well as in some grey-market stores (which are increasingly rare, as most replaced their physical storefront with a virtual presence on Taobao). Therefore, for those few consumers who don’t have a Switch already (of which, any model can also be purchased on Taobao) and will insist on buying the Chinese-authorized model, the full catalog of games for the console will be available, at least in its physical form.

A trap set in place...

Things get more complicated when we consider the digital side of things, and this is where the Chinese Switch seems to be holding a few tricks for the future. The e-shop (console’s virtual market) has been fully localized to be used with Tencent own payment and login services from Wechat, which is the de facto app for all things communication and digital payments in China. Considering the huge appeal and performance of the e-shop around the world, having only one game available at launch really cripples the service, to say the least. Gamers are, for now, left with a bunch of blank screens to look at when opening the platform if they want to buy games digitally. The biggest concern however, is about the future of the console. While the hardware is not region locked for now, there’s no guarantees Tencent won’t simply “flip a switch” in the future and render the console region locked through a software update. If this happens, it will likely occur once the console has at least a few dozen games officially cleared for release in China.

In conclusion, buying an officially released Chinese Switch is not worth the investment. The digital infrastructure is set up in a way that almost screams “IT’S A TRAP!”. As I explained in previous articles, anyone in China can buy an imported model of the Switch anyway, and many have. Only the most uninformed and/or casual of consumers might find it appealing to buy a piece from this launch. Tencent knows it, many consumers know it, investors know it, and Nintendo certainly knows it, as proven by the indifference shown in their revenue forecasts.